The creation of express trusts during a person's lifetime (inter vivos trusts) is subject to certain formalities under the Law of Property Act 1925. The relevant formalities depend on whether the trust concerns land or personal property, and on whether the settlor is declaring themselves trustee or transferring the property to another trustee. Understanding these distinctions is critical, as failure to comply with the required formalities can render a trust void or ineffective.
A declaration of trust respecting any land must be manifested and proved by some writing signed by some person who is able to declare such trust or is expressly referred to in such writing as a party to or witness of the declaration or acknowledgment of such trust.
Section 53(1)(b) requires that a declaration of trust of land must be in writing and signed. A "declaration of trust" is where the owner of property declares that they hold it on trust for another person (or persons). This is distinct from a transfer of property to a trustee, where the settlor parts with legal title. The key point is that the settlor retains legal ownership and declares that they hold it on trust. The writing must be signed by the person making the declaration or by someone referred to in the writing as a party or witness.
In Grey v IRC, the House of Lords considered whether an oral declaration of trust of land could be effective. A husband orally declared that he held his share of the matrimonial home on trust for himself and his wife equally. The House of Lords held that where a person who already owns legal title to land declares themselves a trustee for another, this is a "declaration of trust" and falls within s.53(1)(b). However, where the settlor already owns the property and simply acknowledges the beneficiary's existing equitable interest, this may not be a fresh declaration requiring writing. The case illustrates the fine distinction between declaring a new trust and recognising an existing interest.
A disposition of an equitable interest or trust under a trust of land must be in writing signed by the person disposing of the same, or by his agent thereunto lawfully authorised in writing or by will.
Section 53(1)(c) requires that any disposition (i.e. transfer or assignment) of an existing equitable interest must be in writing and signed by the person disposing of it. This applies to the transfer of a beneficial interest under a trust. For example, if a beneficiary under a trust wants to transfer their equitable interest to someone else, that transfer must be in writing signed by the beneficiary. The writing requirement is less stringent than the requirement for a deed — it need not be witnessed or delivered as a deed.
In Oughtred v IRC, a testator had given his daughter a power of appointment over shares, and the daughter orally directed that the shares be transferred to her son. The House of Lords held that this oral direction was an attempted disposition of an equitable interest and was void under s.53(1)(c) because it was not in writing and signed. The case confirms that an oral disposition of an equitable interest, even if accompanied by part performance or a written transfer of the legal title, cannot take effect. The writing requirement under s.53(1)(c) is strictly enforced.
| Feature | Declaration of Trust (s.53(1)(b)) | Disposition of Equitable Interest (s.53(1)(c)) |
|---|---|---|
| What it is | Owner declares they hold property on trust for another | Transfer of an existing equitable interest to another person |
| Formality | Writing signed by declarant or party/witness | Writing signed by person disposing of the interest |
| Applies to | Trusts of land only | Equitable interests in any property |
| Personal property | No writing required | Writing required |
| Effect of non-compliance | Trust of land may be void | Disposition is void; original owner retains interest |
A common exam pitfall is to assume that all trusts must be in writing. This is wrong. A declaration of trust of personal property (e.g. shares, chattels, money) does not need to be in writing. Only a declaration of trust of land must be in writing under s.53(1)(b), and only a disposition of an equitable interest must be in writing under s.53(1)(c). Trusts of personal property can be created orally, provided the three certainties are satisfied.
When analysing formality problems, always ask two questions: (1) Is this a declaration of trust (settlor retains legal title and declares trust) or a disposition of an equitable interest (transfer of existing beneficial interest)? (2) Does the trust relate to land or personal property? The answers determine which formal requirements apply. A declaration of trust of personal property needs no writing at all. A declaration of trust of land needs writing signed under s.53(1)(b). A disposition of any equitable interest needs writing signed under s.53(1)(c).
A trust is "constituted" when the legal title to the trust property has been properly transferred to the trustees and they hold it on trust for the beneficiaries. Constitution is the process by which the trust becomes fully effective and binding. Until the trust is properly constituted, the beneficiaries have no enforceable equitable interest in the property. The settlor must have done everything necessary to transfer the property to the trustees.
Milroy v Lord is the leading case on constitution of trusts. The settlor attempted to transfer shares to a trustee by signing a share transfer form and handing over the share certificates, but the transfer was never registered with the company. The Court of Appeal held that the trust was not constituted because the settlor had not done everything necessary to transfer legal title to the shares. The case established the principle that equity will not perfect an imperfect gift. If the settlor has chosen a particular method of transfer, that method must be completed for the trust to be effective.
A volunteer is a person who has not provided consideration for the transfer of property. The maxim "equity will not assist a volunteer" means that if a settlor attempts to create a trust but fails to properly transfer legal title to the trustees, the intended beneficiaries (who are volunteers) cannot compel the settlor or their estate to complete the transfer. The intended beneficiaries have given no consideration and therefore have no equitable remedy to enforce the trust.
A volunteer is a person who receives (or is intended to receive) property without giving consideration. In trust law, the beneficiaries under an express trust are typically volunteers — they have done nothing in return for being made beneficiaries. This matters because if the trust is not properly constituted (i.e. legal title has not been transferred to the trustees), the beneficiaries cannot go to court to compel the settlor to complete the transfer. They are volunteers, and equity will not assist them.
The rule in Strong v Bird is an exception to the principle that equity will not assist a volunteer. Where a person (the donor) has attempted to make a gift during their lifetime but has not completed it, and the donee later becomes the executor (or administrator) of the donor's estate, the gift is treated as having been completed. The rationale is that the donor's intention to give, combined with the donee's position as executor, gives the donee the legal title that was previously missing. The requirements are: (1) the donor must have intended to make a gift during their lifetime; (2) the gift must have been imperfect (not fully transferred); and (3) the donee must have been appointed executor of the donor's estate.
Re Ralli's Will Trusts clarified the rule in Strong v Bird by requiring that the donor must have a present intention to make an immediate gift, not merely a future intention. In this case, a testator had told her solicitor that she wanted to leave certain property to her grandson, but she had not taken any steps to effect the gift during her lifetime. The court held that Strong v Bird did not apply because there was no evidence of a present donative intention at the time the grandson was appointed executor. The mere fact that the donee was executor was not enough — there had to be an uncompleted gift that the donor genuinely intended to make.
The rule in Strong v Bird is an exception to the general principle and is narrowly construed by the courts. It only applies where the donor had a clear, present intention to make a gift during their lifetime and the gift was incomplete. It does not apply where the donor merely expressed a wish or intention to give in the future. Additionally, the donee must actually be appointed executor — if the donor dies intestate and the donee is the administrator, the rule does not apply (administrators are not executors).
Donatio mortis causa (DMC) is a gift made in contemplation of death. It is another exception to the rule that equity will not assist a volunteer. If all the conditions are met, the gift takes effect on the donor's death, even though the donor did not complete the transfer during their lifetime. DMC operates as a quasi-inter vivos gift — it is not a gift under a will (which would need to comply with the Wills Act 1837) but takes effect only on death.
For a valid DMC, the donor must contemplate death from a specific cause or event, not death in general. The contemplation must be the dominant reason for making the gift. In Sen v Headley [1991], a woman who was about to undergo surgery gave her nephew a ring, saying "you have always been good to me and I want you to have this." She died after the operation. The court held this was a valid DMC because the gift was linked to her contemplation of death from the surgery.
Proprietary estoppel is the most important exception to the rule that equity will not assist a volunteer. If the settlor has made a clear promise or assurance that the beneficiary will receive an interest in the property, and the beneficiary has relied on that assurance to their detriment, the court may enforce the trust or grant a remedy even though it was not properly constituted. The three elements are: (1) a promise or assurance, (2) reasonable reliance, and (3) detriment. The remedy is at the court's discretion and aims to satisfy the minimum equity to do justice.
In Re Rose, a settlor executed a deed of transfer of shares to himself and his wife as joint tenants, and sent the transfer to the company for registration. Before registration was complete, the settlor attempted to revoke the gift. The court held that once the settlor had done everything in their power to transfer the property (i.e. had executed the transfer and delivered it), the beneficial interest passed to the donee immediately. The fact that registration (a formality required by the company) was incomplete was irrelevant. The settlor had done everything necessary, and the remaining step was purely administrative.
Where land is registered, the transfer of legal title is not complete until the purchaser is registered as the new proprietor under the Land Registration Act 2002. However, under the principle in Re Rose, once the settlor has done everything necessary to effect the transfer (executed the transfer deed and delivered it), the equitable interest passes to the transferee even before registration is complete. The trust is therefore constituted at that point. Once registration occurs, the transferee becomes the legal owner and the trust is fully effective.
Identify the type of property: is it land or personal property (shares, chattels, money)?
Identify the method of transfer chosen by the settlor (e.g. deed, share transfer form, delivery)
Ask: has the settlor done everything necessary to transfer legal title to the trustee?
If YES: the trust is fully constituted. The beneficiaries can enforce it.
If NO: the trust is imperfectly constituted. Consider whether any exception applies.
Exception 1: Is the intended beneficiary a donee who has given consideration? If so, they are not a volunteer.
Exception 2: Does the rule in Strong v Bird apply? (Donee is executor + donor had donative intention)
Exception 3: Is there a valid donatio mortis causa? (Contemplation of death + conditions met)
Exception 4: Does proprietary estoppel apply? (Promise + reliance + detriment)
Exception 5: Does the principle in Re Rose apply? (Settlor did everything necessary)
If no exception applies: the trust is not constituted and the intended beneficiaries cannot enforce it.
Under Milroy v Lord, if the settlor chooses a particular method of transfer and that method is incomplete, the trust is not constituted. The settlor cannot rely on a different method of transfer that they did not use. For example, if the settlor signs a share transfer form but does not deliver it, they cannot argue that delivery was not necessary. However, the Re Rose principle modifies this: if the settlor has done everything in their power under the chosen method, the transfer takes effect in equity even if a purely administrative step remains.
Secret trusts exist to prevent fraud on the statutory formalities required by the Wills Act 1837. Without the doctrine of secret trusts, a person could leave property by will to someone who had promised to hold it on trust for another, and then the legatee could simply keep the property for themselves. The doctrine prevents this by allowing evidence of the secret trust to be admitted, even though it was not included in the will. Secret trusts are sometimes described as dehors the will (outside the will) — they do not operate as testamentary dispositions under the Wills Act but as inter vivos trusts that take effect on death.
| Feature | Fully Secret Trust | Half-Secret Trust |
|---|---|---|
| Will | Appears to give absolute gift to legatee | Will mentions that property is held on trust but terms are not specified |
| Communication timing | Must be communicated before testator's death | Must be communicated at or before execution of the will |
| Acceptance | Trustee must accept during testator's lifetime | Trustee must accept during testator's lifetime |
| Basis | Fraud theory or dehors the will theory | Fraud theory |
A fully secret trust arises where the testator's will appears to give an absolute gift to a legatee, but the testator had in fact communicated to the legatee that they were to hold the property on trust for a third party. The will gives no indication that the gift is anything other than absolute. If the legatee keeps the property for themselves, the intended beneficiary can bring evidence of the secret trust to enforce it against the legatee. The communication and acceptance must have occurred during the testator's lifetime.
A half-secret trust arises where the will mentions that the property is to be held on trust (e.g. "to A on trust") but does not specify the terms of the trust or the beneficiaries. The terms have been communicated to the trustee outside the will. The key difference from a fully secret trust is the timing of communication: for a half-secret trust, the terms must have been communicated to the trustee at or before the execution of the will. If the terms are communicated after the will is executed, the half-secret trust fails.
In Ottaway v Norman, a testator left his estate to his housekeeper, Mrs Norman, by will. Before his death, he had told her that he wanted her to use the estate to provide for his nephew, Ottaway. Mrs Norman accepted this obligation. After the testator's death, she transferred some property to Ottaway but later claimed she was entitled to keep the residue. The court held that a fully secret trust had been created. The testator had intended to create a trust (not merely express a moral wish), the terms had been communicated to Mrs Norman, and she had accepted. She was therefore bound to hold the property on trust for Ottaway.
In Re Snowden, a testator left his estate to his widow by will. Before his death, he had told her that he wanted her to divide the estate equally between herself and his sister. After the testator's death, the widow kept the entire estate for herself. The court held that no trust had been created. The testator's words were merely a request or wish, not an intention to impose a binding trust. The testator had said "I hope you will share it with my sister" rather than directing the widow to hold on trust. This case illustrates the importance of distinguishing between a genuine trust intention and a mere moral obligation.
The Wills Act 1837 requires that a will must be in writing, signed by the testator, and witnessed by two witnesses (s.9). Secret trusts operate outside the Wills Act — they are not testamentary dispositions but inter vivos trusts that are communicated during the testator's lifetime and take effect on death. The evidence of the secret trust is admitted not to add to or vary the will, but to prevent fraud by the legatee who would otherwise take the property absolutely.
A common exam pitfall is to confuse a moral obligation with a trust. If the testator merely expresses a wish or hope that the legatee will use the gift in a particular way, this is not a secret trust. The testator must intend to create a binding obligation, not merely a moral one. Compare Ottaway v Norman (binding trust) with Re Snowden (mere moral wish). The language used by the testator and the surrounding circumstances are critical in determining whether a trust was intended.
For a secret trust to be valid, the communication of the trust terms must be sufficiently certain. The trustee must know what they are supposed to do with the property. If the communication is too vague (e.g. "do something for the children"), the trust may fail for uncertainty. The communication must identify the trust property, the beneficiaries, and the terms of the trust with sufficient clarity. This is particularly important for half-secret trusts, where the will itself refers to the trust but does not set out its terms.
There are two main theoretical justifications for secret trusts. The fraud theory holds that secret trusts are enforced to prevent the legatee from committing fraud by keeping the property for themselves when they promised to hold it on trust. The "dehors the will" theory (outside the will) holds that secret trusts are inter vivos trusts created during the testator's lifetime that merely take effect on death. Under this theory, the Wills Act formalities do not apply because the trust is not testamentary. Both theories lead to the same result in practice, but the dehors the will theory is generally preferred by modern commentators.